I'm not sure what their methodology is, but RA projects an expected CAPE of 25.5 in 10 years: https://interactive.researchaffiliates. ... valuationsCurrent Shiller P/E (10 year rolling average) is 36.3 for the S&P500. The 100+ year average is 17.1. The S&P500 currently trades for 5,580.
That would suggest the S&P500 is 52 percent overvalued, and the "fair value" is ~2,900.
But, how do you know that that the P/E above 17.1 is "overvalued"? Valuation metrics change over time and business cycles.
As always, this post isn't investment advice for anyone... myself included.
This would still leave it at the 85th percentile and corresponds to expected return of 0.8% real over the next 10 years, per their valuation dependent model. Of course, there is a large range around that from -4.9% to 6.4% real (90% probability range).
An immediate drop to that 85th percentile, would mean a decline of about 27%.
Statistics: Posted by jeffyscott — Wed Jul 10, 2024 10:11 am — Replies 30 — Views 2327